Meanwhile, individual cities such as Dallas and Washington, D.C., reported virtually no changes in their prices year-over-year, while Cleveland, Detroit and New York saw their annual prices decline.

Atlanta, an area hit hard by the foreclosure crisis, declined as well but saw its annual price decrease improve to -9.9% after nine months of double-digit declines. Yet, it is still the worst of the 20 cities followed by S&P.

“The news on home prices in this report confirm recent good news about housing,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Single-family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing.”

For the first time in about five years, I got a call from a real estate agent Friday asking me if I was interested in selling my home.

Matt Hoffman of San Mateo says he has had two real estate people come by his home in the past month asking if he wanted to sell because if he did, they had buyers interested. “I said thanks but basically no,” says Hoffman.

After years of having too many homes and not enough buyers, agents in California now have the opposite problem – too many buyers and not enough homes for sale. Hence the cold calls from agents trying to unearth inventory.

The California Association of Realtors reported Monday that its statewide inventory of unsold homes index for existing, single-family detached homes fell to 3.2 months in August from 3.5 months in July and 5.2 months in August 2011. (The latter two numbers have been revised from previous reports.)

The index reflects the number of months needed to sell the supply of homes on the market at the current sales rate. A six- to seven-month supply is considered normal. When the number goes higher, inventory is plentiful and it’s considered a buyer’s market. When the number goes lower, the advantage goes to the seller.

Prices rise

Declining inventory helps explain why the statewide median price of an existing, single-family detached home rose to $343,820 in August, up 3 percent from July and up 15.5 percent from August 2011.

The inventory shortage “is all over the state,” says Leslie Appleton-Young, the association’s chief economist. But it’s especially severe in the Bay Area, where there wasn’t a bulge in construction during the housing bubble, there isn’t a lot of developable land and the economy is the strongest in the state, she adds.

In the Bay Area, the index was at 2.7 months in August versus 4.5 months a year ago. The lowest inventory level in the Bay Area was 0.9 month in December 2004 and the long-run average from 1992 to the present is 4.7 months, lower than the statewide long-run average of 6.5 months, Appleton-Young says.

Even the Inland Empire, scene of tremendous overbuilding, has seen a shortage develop – the region’s unsold homes index was 3.3 months in August compared with 4.5 months a year ago.

“There is no question there is a shortage of homes for sale even in places like Stockton, which not long ago had years of inventory,” says Sean O’Toole, chief executive of ForeclosureRadar.com. “Prices became very attractive in those (hard-hit) areas and provided a great return for investors and a great opportunity for first-time buyers. That inventory went away very quickly as people realized a bargain was to be had. There are not so many bargains at this point.”

Not flipping

Unlike investors who five or six years ago were buying distressed properties to flip for a quick profit, investors today “are coming in because rental yields are providing a nice rate of return,” says Lawrence Yun, chief economist with the National Association of Relators.

That means those homes probably won’t be coming on the market anytime soon.

Nationwide, the glut of homes has also evaporated. In July, there was a 6.4-month supply of homes compared with 9.3 months in July 2011. The current number is right around long-term average, but Yun says there are “acute shortages” in places such as California, Arizona Nevada and parts of Florida.

So what has become of the so-called shadow inventory of foreclosed or distressed properties that banks have supposedly been keeping off the market and could unleash at any time, causing another leg down in the housing market?

O’Toole says the shadow inventory is like a funnel. “It starts with people being underwater, some of them stop making payments, some of those end up in foreclosure.” The homes that end up in foreclosure eventually end up on the market.

“What we have seen since September 2008 is that the rate of foreclosure is slowing faster than the number of people who are delinquent and certainly faster than the number of people underwater.” In other words, the spout is getting clogged, with fewer foreclosed homes going up for sale.

Foreclosures fade

The reasons, he says, include federal regulations that allow and encourage banks to hang onto foreclosed properties longer combined with state regulations designed to slow down the foreclosure process on behalf of homeowners.

“Then you get this political climate that is antiforeclosure,” O’Toole says. “What it means for the housing market is we are not seeing a wave of foreclosures and we are not going to see a wave of foreclosures,” O’Toole says.

Many underwater

Also choking supply is the fact that so many homeowners are underwater – or owe more than their homes are worth – and unable to sell without taking a loss.

CoreLogic recently reported that the percentage of homes with mortgages underwater dipped slightly to 22.3 percent at the end of the second quarter from 23.7 percent at the end of the first quarter.

As prices rise, more homes will float above water, but it’s going to take time. Meanwhile, there are still a lot of homes that are not likely to come onto the market.

At some point, the balance will tip, but it’s hard to predict when. When banks decide prices are high enough, they will start unloading houses they have been sitting on, says Jed Kolko, chief economist with real estate website Trulia. “For developers, when prices have been stable and rising for long enough, they will want to start building. We are seeing some rebound in construction,” Kolko says.

In some parts of the country, such as San Jose, “It is back up to normal for the local market,” he adds. In other parts, such as Sacramento, “It is still way below normal.”

Home prices skimmed close to the bottom during July this year but climbed 6.3 percent year-over-year by August, according to RE/MAX.

The real estate company revealed in its latest National Housing Report that median home prices ticked up from last year over the last seven straight months.

Home sales jumped 8.5 percent year-over-year, continuing its ascent from over the last fourteen consecutive months, and 2.5 percent on a monthly basis in August.

“As we move from summer to fall it’s very encouraging that this year’s home selling season began strong and finished even stronger,” Margaret Kelly, CEO of RE/MAX, said in a statement. “Nearly every month in 2012 experienced increased sales and prices over 2011, showing that we’ve definitely passed the bottom and we’re looking forward to 2013 being an even better year.”

According to RE/MAX, home inventory dipped 29.7 percent below levels from August last year – a trend that the company report says “remains a serious challenge to this recovery.”

The median sales prices for homes solid in August averaged $168,685, down by only 0.2 percent from July. Prices crested this summer in June, remaining higher from last year over the last two months.

According to the GSE’s August 2012 National Housing Survey, consumers maintain a cautious but improving view of homeownership and the housing market. The average home price change expectation is 1.6 percent, mostly consistent with July’s results and down from a June high of 2.0 percent. Meanwhile, 11 percent of those surveyed say home prices will go down in the next year, holding steady at the lowest level since the survey began in 2010.

Eighteen percent of respondents say it is a good time to sell, the highest level since the survey began. At the same time, the percentage of respondents who say it is a good time to buy remained steady at 73 percent. Approximately 40 percent of respondents said mortgage rates will go up in the next year, 4 percentage points higher than July.

Consumers scaled back rental expectations a bit. Of those surveyed, 44 percent said they expect rental prices to increase in the next year, a drop of 3 percentage points, while 5 percent expect rental prices to fall. The average rental price change expectation fell 0.7 percent to 3.2 percent, the lowest level since January this year.

“Consumer attitudes toward the housing market remain modestly positive, despite signs of increase concern over the direction of the economy,” said Doug Duncan, SVP and chief economist at Fannie Mae. “Friday’s disappointing jobs report underpins the gradual nature of this year’s housing recovery and supports our view that the muted economic recovery is still subject to downside risk and that additional Fed easing will soon be forthcoming.”

The number of respondents who believe the economy is headed in the wrong direction continued to tick up to 60 percent, the third straight rise to the highest reading since the start of the year. Thirty-three percent said the economy is on the right track, a slight drop from last month and 5 percentage points down from May’s peak.

Those who expect their financial situation to get worse dipped to 13 percent, while those who expect no changes in their financial situation increased to 41 percent.

Finally, the share of respondents who say their household income is significantly higher than it was a year ago remained level at 20 percent, while those who say it is significantly lower increased to 16 percent.

This Friday, September 7th, is the last day to enter our Client Challenge. There are 4 more days to enter before the raffle! Please send us a picture or write to us about your moving day experience. Can’t wait to see your pictures and stories. Look at our San Diego at Home Facebook page to see the most recent entries!!